All Rights Reserved. Discovery's Stock, 2 Growth Stocks That Can Turn $250,000 Into $1 Million by 2030, Billionaire Investor Bill Ackman Is Raking In $97 Million In Annual Dividend Income From These 2 Stocks, 1 Bargain-Basement Warren Buffett Stock Down 78% to Buy Before It Starts Soaring, 3 No-Brainer Stocks to Buy With $50 Right Now, Join Over Half a Million Premium Members And Get More In-Depth Stock Guidance and Research, Motley Fool Issues Rare All In Buy Alert, Copyright, Trademark and Patent Information. We feel really good about where we are.. The thinly traded shares (ticker: DISCB) that are 95% owned by media mogul and Discovery board member John Malone traded Tuesday at $68.88, down $1.02. I also have concerns regarding the toll cord cutting may take on the companys future results. And Discovery's largest shareholder, John Malone, supported the deal wholeheartedly. Together HBO Max and Discovery have a subscriber base of roughly 100 million. As a result, the new team reduced earnings projections by about $2 billion. It's worth noting that these forecasts were before Discoverys merger announcement. All Rights Reserved. AT&T's shares were down 2.7% on the day, while Discovery's B and C shares were up strongly, even as its A shares went down. Consequently, I rate WBD as a HOLD. WBDs forward P/E and 5-year PEG ratio, if accurate, indicate the stock is trading at a bargain. 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Founded by four brothers in 1923, Warner Bros. is a giant in the film industry, but has changed hands more time than most fans can count. At this point, the majority of heavy lifting (related to restructuring charges etc.) Echoing our thoughts from the previous coverage, we believe the fast-approaching WBD spinoff will be a promising play for participating AT&T investors. To balance that debt, at the end of 2021, WBD had a bit over $4.1 billion in cash. The company posted a 5% growth in U.S. advertising and an 11% increase in distribution revenue due to Discovery+. Discovery a Buy? All Right Reserved. Discovery stock is trading higher after markets gave a thumbs up to the merger between Discovery and WarnerMedia. That same study revealed that when questioned regarding their level of satisfaction among SVOD services, HBOMax received the highest score. Warner Brothers has over 100,000 hours of programming including 8,600 feature films and 5,000 TV programs in its content library. net asset value under U.S. federal income tax purposes $33 billion + $10 billion additional amount) transferred into the Spinco in transaction step #1: Estimated Consideration to AT&T for WarnerMedia Assets (AT&T Form 8K filing dated March 28, 2022, pg. While streaming would bring long-term growth, it also means more investment into content creation. Discovery CEO David Zaslav And as I'm looking under the hood here again, CNN+ is just one example, and I don't want to go through sort of a list of specific examples, but there's a lot of chunky investments that are lacking what I would view as a solid analytical, financial foundation and meeting the ROI hurdles that I would like to see for major investments. I am not receiving compensation for it (other than from Seeking Alpha). In an effort to shore up the bottom line, the company has cut jobs and content including CNN+ and a Batgirl film set for HBO Max. Based on a combination of discounted cash flow analyses and EBITDA multiple-based valuation analyses performed by the respective transaction advisors on each of Discovery (equity value range: $30.6 billion to $43.1 billion) and WarnerMedia (equity value range: $55.9 billion to $94.3 billion without synergies; $87.3 billion to $127.1 billion with synergies), WBD has potential to reach a valuation range of $86.5 billion to $137.4 billon without synergies, and $117.9 billion to $170.2 billion with synergies post-close. For a time, it seemed like Warner was a big dog, buying up companies like DC Comics, Six Flags, and Lorimar. Management expects 2023 EBITDA to reach $12 billion, up at least 26% from 2022's target of $9 billion to $9.5 billion. WBD, Meanwhile, investors will receive a lower dividend while they wait for the company to execute and catch up. Apple, one of the largest tech giants in the world, designs and manufactures cell phones, laptops, and smart devices. That, plus the lower dividend, will allow AT&T to focus on building out its 5G network and its fiber footprint over the next few years. The idea is that Warners has not been fully capitalizing on the brand's potential. DISCA stock looks like a good buy at the current prices. The Spinco Financing Agreements allude to debt totaling approximately $42 billion received from a combination of bridge loans, term loan credit agreements, note issuances, and revolving credit agreements obtained or completed through commitments with JPMorgan Chase Bank, Goldman Sachs Bank, Goldman Sachs Lending Partners LLC, and "certain other financial institutions". These issued Spinco common stocks can be exchanged for 0.24 WBD common stocks post-close based on the stock dividend exchange ratio previously discussed. Bolstered by strong international results, WBD increased total revenue by 13% to $3.16 billion. Now, the record date is not the same as the transaction completion date. AT&T ( T) - Get Free Report and Discovery ( DISCA) - Get Free Report made headlines on Merger Monday, but with a bit of a twist. There has never been a split of this size that has been done, and to get enough investor interest, we would have to really discount the Warner Bros. Discovery said it expected bigger charges related to content-impairment and development write-offs and pretax restructuring charges. The Coke vs. Pepsi debate doesn't just apply to the supermarket the brands are also rivals in the stock market. Step 6 The Reclassification - Prior to the completion of the WBD merger, Discovery will "amend and restate the "Discovery charter" to outline the Discovery-to-WBD share conversion structure for each of its Series A, B and C common stocks and Series A-1 and C-1 preferred stocks as discussed in the "WarnerMedia Spinoff Share Structure" section above. Cost basis and return based on previous market day close. Last week, AT&T confirmed April 5th at market close as the record date for the stock dividend related to the WarnerMedia spinoff. My sister has always struggled with money and drugs. Discovery is now a buy, hold or sell. The blended average of the combined WBD valuation range with and without synergies is about $102.2 billion to $153.8 billion. Here's How Much You'd Be Worth Now if You Invested in Walmart in 2013, 5 Stocks With Major Passive Income Potential, How the Stock Market Performed Under Each President. Discovery, they discovered that the previous management had been overly optimistic with their projection of Warner Bros. prospects. Telecom giant AT&T chose to spin off, rather than split off, WarnerMedia in a key step of the entertainment units merger with Discovery to avoid having to really discount the merged Warner Bros. Discoverys stock, AT&T CFO Pascal Desroches told investors Monday. Read More About: AT&T Its options had been the spinoff, in which AT&T stockholders will receive shares in the merged company in addition to their existing AT&T shares; a split-off, which would have allowed shareholders to choose between stock of AT&T and the new company; or some combination of the two. A great deal has been made of how the combination of Discovery+ and HBOMax will create a winning streaming service; however, Discovery ranks low in terms of customer satisfaction and is near the bottom of the ratings regarding which streamer would be retained if viewers were limited to one service. He recently completed a technical communication diploma and holds previous university degrees in journalism, sociology and criminology. I wrote this article myself, and it expresses my own opinions. We will not launch any new markets for the time being. Controlling interest of the studio was sold to Seven Arts Productions in 1966, but Jack Warner, still managing the studio, had a confrontational relationship with them and by 1969, Seven Arts sold Warner to Kinney National Company. I am a retired law enforcement officer. Magallane, Inc. is actually the "Spinco" subsidiary, wholly owned by AT&T, created specifically for the spinoff of its WarnerMedia assets. Networks jumped 7% to $1.93 billion while International Networks registered 25% growth to $1.23 billion. I have no business relationship with any company whose stock is mentioned in this article. Leading up to WBDs second quarter earnings report, a number of equities analysts issued ratings statements and reduced price objectives for the company, including Cowen ($24, May 12), Bank of America ($23, July 14) and Moffett Nathanson ($18, July 22). An SEC filing last March, just prior to the merger, revealed that Discovery forecasts revenue from its U.S. linear TV business will decline by 4% per annum through 2025, while expenses are expected to accelerate. Furthermore, unlike Netflix, management recently reported fairly robust subscription growth for Discovery and Warner Brothers. totaling approximately $42 billion received from a combination of bridge loans, term loan credit agreements, note issuances, and revolving credit agreements obtained or completed through commitments with JPMorgan Chase Bank, Goldman Sachs Bank, Goldman Sachs Lending Partners LLC, and "certain other financial institutions". Make this your go-to guide to understanding stock charts. That sale is being blamed for the slow pace of renewals for some of The CW's shows, including the Warner Bros.-ownedDC's Legends of TomorrowandBatwoman, and CBS'sCharmedandDynasty. We will be a simpler, more focused company with the intent to become Americas best broadband provider.. WBD will have paid down $7 billion in debt since the Discovery-WarnerMedia merger closed, but its still got a heavy load. AT&T Regular Way Trading - AT&T shareholders can engage in "Regular Way Trading" during the two-way trading period if they wish to sell "both the share of AT&T common stock and the right to receive shares of WBD common stock in the transaction". S&P rates WBDs debt as BBB-/positive, the lowest level of investment grade. The new streaming behemoth will have a huge library of 200,000-plus hours of content, from Warner Bros. Studios, HBO and MBO Max, The Turner channels (TNT, TBS, CNN), as well as Discovery's comprehensive portfolio of unscripted content. There was an unknown error. Trading AT&T and Discovery After $43 Billion Media Merger AT&T and Discovery have come to terms on a $43 billion media deal. Due diligence should be exercised and readers should engage in additional research and analysis before making their own investment decision. At the time David has covered a wide variety of financial and lifestyle topics for numerous publications and has experience copywriting for the retail industry. Discovery was word that DC could be restructured. Discovery ("WBD"). Discovery (WBD -2.01%). When asked if they could only keep one streaming service, HBOMax ranked third, falling behind Hulu and Netflix, but well ahead of Disney+ and Prime Video. Earlier this year, the merger of AT&T 's ( T -0.57%) WarnerMedia with Discovery ( DISC.A) ( DISC.B) ( DISCK) was given the green light by U.S. regulators. Erik Khalitov/iStock Unreleased via Getty Images. Under the terms of the deal, WarnerMedia retained $43 billion in debt. The Wall Street Journal this month reported that Warner Bros. Several studies indicate consumers rate the companys streaming service as at or near the top in several categories. All rights reserved. ET. This array of content serves to attract and retain subscribers. Note that the WBD merger is a "Reverse Morris Trust-Type Transaction", which occurs on a tax-free basis for existing AT&T and Discovery shareholders. Of course, the numbers behind the earnings report pertain to the former Discovery, Inc; however, management provided some important metrics related to WarnerMedia, as well as some relevant commentary. Step 4 Issuance of Spinco Common Stock - Prior to AT&T's distribution of rights to shares of WBD common stock to existing AT&T shareholders as of record date, the Magallanes, Inc. Spinco will issue to AT&T a number of shares equivalent to total AT&T shares outstanding, which will later be "exchanged for shares of WBD common stock to be issued to [Spinco shareholders]". 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